White House calls for more auto restructuring

SAN FRANCISCO (MarketWatch) -- U.S. automakers must carry out "significant restructuring" which will involve "concessions on the part of everyone," a senior adviser to President Barack Obama said Sunday, keeping the pressure on companies ahead of their deadline to present their plans.

"We need a thriving auto industry in this country," David Axelrod, a senior adviser to President Obama, said on "Fox News Sunday."

"But as the president has said many times, that's going to involve significant restructuring of the industry so that they're looking forward and not back in producing the kind of cars that people are going to buy in the future," Axelrod said.

He said the overhaul of the U.S. auto industry would require sacrifices from "not just the auto workers, but shareholders, creditors and, of course, the executives who run the company."

General Motors Corp.
GM, -0.52%
and Chrysler LLC face a looming deadline Tuesday to submit their restructuring plans to the government in order to get $17.4 billion in loans from the U.S. Treasury Department.

But according to a Wall Street Journal report Saturday, GM will offer the government the choice of giving it billions more in bailout money or seeing it file for bankruptcy when it presents its restructuring plan next week. See full story on GM's plan to avoid bankruptcy.

Treasury officials believe GM needs at least $5 billion more in loans to keep operating beyond the first quarter, according to the report.

When asked about the possibility of an automaker filing for bankruptcy, Axelrod said, "I'm not going to prejudge anything."

Union talks hit snag

The top U.S. automotive labor union, the United Auto Workers, has objected to proposals from GM and Chrysler to modify a retiree health-care fund.

UAW negotiators walked away from talks with GM on Friday night because the company made demands related to its cash contribution to retiree health-care funding perceived as "detrimental to retirees," according to an Associated Press report Saturday, citing an unnamed source.

When asked about the stalled UAW talks, Axelrod was cautious ahead of the automakers' restructuring plan deadline.

"Obviously this is a difficult situation," he said. "We'll wait and see what the automakers are going to say Tuesday."

Ford Motor Co.
F, -0.28%
the only major U.S. automaker not relying on U.S. government aid to survive, was the focus of UAW negotiations this weekend after the talks with the other two major U.S. automakers collapsed.

The union is going to the strongest automaker first, as it usually does in contract negotiations, according to Bloomberg News, citing a person briefed on the talks.

GM's struggles

GM is working on a debt exchange that would slash its unsecured debt by two-thirds to $9.2 billion. Overall, the company is seeking to halve its $62 billion in total debt under the terms of the $13.4 billion loan package, with bondholders required to accept about 30 cents on the dollar.

But creditors are looking for 50 cents on the dollar, which they say mirrors the value of concessions being negotiated with the United Auto Workers, according to the Detroit News. Read more on GM's restructuring plan.

GM said last week it plans to cut some 3,400 jobs, or 12% of its U.S. salaried workforce. Shares of the automaker have fallen nearly 15% in the past three months. The shares closed Friday down more than 5% at $2.50. See full story on GM's job cut announcement.

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